BankSA vows to beat home loan rates of big four banks

BANKSA has thrown down the gauntlet to the big four banks, vowing to beat their advertised home loan rates for the next four weeks.

From today, customers will be able to take the big four's advertised rates to BankSA, which it promises to beat by 0.01 per cent.

BankSA managing director Jane Kittel said the commitment applied to fixed and variable rate home loans.

"In terms of competition in the market place, we've continued to improve our offering for customers in South Australia," she said.

"We've had some really strong fixed rates which have been available for the last six months and this new offer is all about attracting new customers."

BankSA increased its home loan base to $12 billion in the year to September, making it the state's biggest home lender. But soft residential conditions continue to dog the market, Ms Kittel said.

"Our home loans grew by 3 per cent but certainly consumer sentiment is having an impact on people's decision-making," she said.

Ms Kittel said the bank would consider extending the special offer past December 21. "There's no plan at this point in time but like everything, we will always review what competition is looking like in the market."

On a new $250,000 mortgage, the discount equates to a saving of almost $19 a year.

Fellow Westpac subsidiary Bank of Melbourne also announced it would undercut the advertised rates of the larger banks. Meanwhile, Ms Kittel expected next week's Reserve Bank meeting, where the board will decide on whether to cut the cash rate from 3.25 per cent, to be a "tough call".

"But we still believe we're in a declining rate environment and we do expect a rate cut whether that's next month or early next year," she said.

However, Ms Kittel reiterated that higher funding costs remained a barrier to further rate reductions if the Reserve Bank was to move lower.

"Certainly as we've seen all banks increase the amount of retail deposits they hold, to reduce their reliance on wholesale funding, the cost of retail deposits has continued to increase as there's been stronger competition in the market," she said.

To qualify for BankSA's offer, home loans need to be settled by February 28.

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